In 2013, when her daughter lost her job and moved in with Kim, bringing her infant son, Kim turned to payday loans again. Eventually, she had seven loans, with annual rates varying from 120 to 608 percent. She had to default in July of 2014. “I couldn’t afford to pay them back, I had loans to cover loans,” she said. Her sister tried to bail Kim out with $1,200, but it just wasn’t enough. At one point, 75 percent of her income was going to pay off her payday loans. There was “nothing” left for food or electricity, she said. “If I lose my electricity, I lose my housing, then I’d be evicted and I’d be homeless,” she said. “It took us four months to get caught up on electricity, and we needed assistance, but we were close to being homeless.”
Hickey, who has helped members of his congregation trapped in the cycle of payday-lending debt, grew frustrated watching people get rich off of exploitation. “I’ve given away thousands of dollars to pay the lenders off,” he said. One payday-loan mogul, Chuck Brennan recently purchased a $9 million second house in Newport Beach. “Good for him,” Hickey said. “I don’t mind people making money, but I feel like I partially funded that by paying the people who owe him.” He also noted that payday lenders often exploit those who are relying on government assistance, leaving taxpayers to foot the bill. “It’s an intentionally defective financial product that is deceptively marketed to the unsophisticated who are barely holding on at the margins of our society,” he said.
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The experience of the two Steves is not rare. Across the country, the payday-lending industry has a vise-like grip on legislatures. A campaign to end payday lending in Montana began bringing forward “every kind of bill you could imagine” to cap interest rates, said Tom Jacobson, a Montana State Representative. But it found itself unequal to the opposition. “They were paid lobbyists and we were advocates,” explained Jacobson. “We were never once able to get it out of committee.” After 10 years of stonewalling in the legislature, advocates pushed forward with a ballot initiative to cap rates at 36 percent. The measure that couldn’t even get to the floor in the legislature won an astonishing 72 percent of the vote at the polls.
So far, payday-lending reformers have successfully fought four ballot initiative battles nationwide. In 2005, Texas voters stopped an initiative that would have allowed the legislature to exempt commercial loans from laws setting maximum interest rates. In 2008, Ohio voters passed an initiative capping payday loans at a 38 percent interest rate. In Arizona, the payday-lending industry tried to use a ballot initiative to secure its continued operation but lost, 59.6 percent to 40.4 percent. Payday lenders used their vast resources to attempt to derail these campaigns to cap limits. The National Institute on Money in Politics estimates that the industry spent $35.6 million in Arizona and Ohio to influence ballot initiatives. In Ohio, the industry spent $16 million on the ballot initiative, while their opponents spent only $265,000. In some cases, however, the industry has succeeded, primarily by keeping the issue off of the ballot. In Missouri, the payday-lending industry spent $600,000 (compared to the $60,000 raised by advocates) to successfully keep the issue off the ballot.